South By North Strategies, Ltd.

TaxVox points out that the home mortgage interest deduction is an expensive case of the federal government acting “as a reverse Robin Hood.”

The single biggest housing subsidy is the mortgage deduction, which will add $130 billion to the deficit in the coming year alone. But even worse, at a time when both Democrats and Republicans claim to worry about the long-term deficit, the MID is a case of government acting as a reverse Robin Hood—the biggest  subsidies go to those who need it least.  The Tax Policy Center estimates that more than 70 percent of the benefit of the mortgage and property tax deductions go to the highest-earning 20 percent of households—those making $104,000 or more.
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This happens mostly because the tax break on home loans is structured as a deduction.  Imagine, for instance, that you and I both pay $1,000-a-month in mortgage interest. If you are in the 10 percent bracket (a married couple with adjusted gross income of $36,000 or less), your after-tax interest  cost  is $900. If my wife and I are in the 35 percent bracket (with taxable income of $379,000 or more), our after-tax cost is just $650. And that’s after federal taxes. The benefit is even more dramatic when you figure state income tax breaks.
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This upside down subsidy also encourages the purchase of more expensive houses. I understand that some communities have very high housing costs. I live in one. But the average sales price in the U.S. last year was just $270,000.